Ovato revenue down as rebrand gains momentum

Ovato, the printing, marketing and distribution giant formerly known as PMP, has reported a $10.9m half year net loss but chief executive officer Kevin Slaven says that was no suprise as merger related costings were finalised amid a continued corporate rebirth.

As part of that process the company will close its Moorebank operation in western Sydney by the end of 2019 saving $24m annually, decommission six of its older presses and install a new 80pp Manroland Lithoman at the consolidated Warwick Farm site.

The largest wedge of Ovato’s business, Ovato Print Group Australia, took a 12.9 per cent hit on HY revenue to $213m but Slaven says this was offset by Australian print EBITDA margins increasing from 3.9 per cent on the pcp to 6.2 per cent.

He also cited a 45.6 per cent increase in EBITDA for the company’s marketing arm to $4.3m as a sign that Ovato’s full service end-to-end offering for customers is rising and will continue to increase.

Ovato increased its cash spend from the predicted $20m in August 2018 to $50m for FY19-21 to cover redundancies, site works, make good and press relocations.

Group net loss was $8.7m less compared to the first half of 2018 which Slaven said was due to a reduction in merger costs.

“There was a lot less significant items in this half versus last half because we have come through the major restructuring costs that we incurred post-merger,” Slaven told ProPrint.

“The positives for us in the results are that the Australian print margins have improved, as a result of the restructuring costs that we’ve done post-merger, they are now starting to flow through. Our marketing services businesses have increased their profitability as we grow new revenue streams.”

Duplication in production between Moorebank and Warwick Farm was behind the decision to move everything under one roof at Warwick Farm, the largest print production facility in the southern hemisphere, Slaven said.

Slaven confirmed there would be job losses around the site closure but did not put a figure on how many.

“From a printing point of view it was a duplication. The letterbox distribution was co-located already at Warwick Farm so we are taking the best of the people, the best of the plant from Moorebank and retiring older, less efficient equipment at both Moorebank and Warwick Farm and consolidating the sites,” Slaven said.

Slaven pointed to New Zealand as a drag on the bottom line, which he said was in the same state Australia was in four or five years ago with too much capacity in the market.

“Some of that benefit was offset by competitive pressures in New Zealand. So our result in New Zealand was worse year on year which impacted on the overall group result,” he said.

“New Zealand is a very competitive market and we’ve been renewing contracts at lower prices because of competitive pressures over there.

“As market leader we are on the front foot to help sort out the over-capacity issues in the market over there.”

Soft retail and real estate markets mean Ovato will take a cautious approach to 2019 at a macro level, he said.

Ovato has also signed an exclusive deal with data analytics firm Quantium which he says will show clear metrics on the value of the printed catalogue for retail sales.

The company announced its rebrand in December 2018 and has reorganised its core competencies into four pillars of print, distribution, agency and production as it continues to support the business’s vision of turning audiences into customers and driving growth.

Other businesses across the group to be brought under the Ovato banner include Gordon and Gotch, a magazine and retail distribution group; SBM, a full-house creative and production business; Traction Digital, which provides digital marketing and engagement services; Spectrum Group, a PR, digital and content marketing agency; and Griffin Press, Australia’s oldest book printing business.

Margins improved: Ovato chief executive officer Kevin Slaven says Australian print margin increases have been encouraging as the business resets

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